Quote on USDINR Market Outlook by Anindya Banerjee, Head Currency & Commodity, Kotak Securities
Below the Quote on USDINR Market Outlook by Anindya Banerjee, Head Currency & Commodity, Kotak Securities
The USDINR spot pair has been consolidating within a tight range of 85.00 to 86.00, with market participants awaiting a decisive trigger. Comfortable liquidity conditions in the money market, following the CRR reduction, have led to a softening in forward premiums as interest rate differentials between India and the U.S. continue to narrow. This has made forward hedging less attractive for exporters.
The next significant directional cue for the pair is likely to emerge from risk sentiment and the broader trend in the U.S. Dollar Index (DXY), which is currently attempting to establish a short-term base. A sustained move above the 100.00 mark in the DXY could propel USDINR beyond the 86.00 resistance, with a potential extension towards 86.50.
There has been considerable noise around U.S.–China trade negotiations, but progress remains elusive. As long as the U.S. continues to prioritize an "America First" agenda under the Trump administration, a comprehensive trade deal with China—or even with Europe—appears unlikely. Instead, we foresee a structural "trade reset" rather than a resolution.
Given these global uncertainties, we maintain a medium-term bullish bias on USDINR, with the potential for a test of 87.00 levels in the coming months—provided the key support at 84.90 holds. A further rally in the U.S. Dollar Index or a rise in global risk aversion due to escalating trade tensions and signs of a weakening global economy could act as catalysts.
That said, we expect the RBI to stay active in the forex market to curb excessive volatility. On the domestic front, India’s relatively stable macroeconomic fundamentals continue to provide a firm underpinning to the rupee
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